SEBI PERMITS CREEPING ACQUISITION BEYOND 55%

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SEBI vide its press release dated 27th October, 2008 has decided that consolidation through creeping acquisition shall be allowed up to a maximum of 75%. The earlier position was that promoters could increase their stake in the company by buying upto 5% of the equity in a year. However, such increase was allowed only to a maximum limit of 55% of the equity of the company.

SEBI through the aforesaid press release clarified that such acquisition of up to 75% can only be via open market purchases in the normal segment. Consolidation through bulk, block or negotiated deals or through preferential allotment shall not be allowed. It has further been decided that promoters will no longer require permission if their holding increases on account of buyback by a company upto a limit of 5% per annum.

Necessary amendments to SEBI (Substantial Acquisition of Shares and Takeovers) Regulations shall be carried out separately.

Key implications:
1. Creeping acquisition upto 5% allowed between 55% to 75% holding (Acquisition only through open market route).
2. Automatic exemption of increase upto 5% per annum as a result of buy back by a company.

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